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Frequent flyer credit cards vs. debit cards

2 August 2017

Want to earn frequent flyer points for paying with plastic? Read on to find out whether a frequent flyer credit card or debit card is right for you.

Credit cards have been one of the most popular ways to earn points for years, offering a competitive way to rack up rewards as you spend. As cards and frequent flyer programs have evolved, so too have the products we use to earn rewards.

As well as a huge range of reward credit cards, there are now several frequent flyer debit cards that can earn us points for transactions and account activity. Currently, the main ones are:

1. The Bankwest Qantas Transaction Account. This regular transaction account comes with a Mastercard debit card and earns Qantas Points for account activity such as purchases.

2. The Qantas Cash prepaid Mastercard. A prepaid debit card that lets you load up to 11 different currencies on the card (including Australian dollars) and earns points for purchases. The Qantas Cash card also doubles as your Qantas Frequent Flyer card, so you may already have this option in your wallet.

Unlike credit cards, these options don’t attract interest charges or annual fees worth hundreds of dollars. They’re basically like normal debit card or transaction accounts, which makes them an appealing alternative for people who don’t want to use a credit card for purchases but still want to earn frequent flyer rewards through everyday transactions.

On the other hand, these debit cards don’t offer all of the benefits that come with frequent flyer credit cards, and are still so new that many people don’t even know about them.

So is it better to get a frequent flyer credit card or a frequent flyer debit card? Here we look at the key factors for both options to help you decide which type of card will work best for you when it comes to earning rewards for your purchases.

1. Points per dollar

When comparing these two card types, how many points you can earn per dollar (otherwise known as the earn rate) is one of the first things you’ll need to look at.

Frequent flyer credit cards

You can currently earn between 0.5 and 2 points per $1 spent with a frequent flyer credit card depending on the account and the way a purchase is made.

The ANZ Frequent Flyer Black, for example, earns you 1 Qantas Point per $1 spent on eligible purchases up to $7,500 per statement period, then 0.5 Qantas Points per $1 spent on eligible purchases above $7,500 per statement period.

More premium options, such as black credit cards, will also give you a higher rate of rewards per dollar spent when compared to other options. The Velocity Flyer credit card, for example, currently earns 0.66 points per $1 spent on eligible purchases up to $5,490 per statement period, then 0.5 points per $1 spent on eligible purchases above $10,000.

Point caps

It’s also worth noting that many of these cards now limit the amount of points you can earn each month or year. This means you will only be able to earn up to a certain amount of points by paying with your card before it stops being worth it.

For big spenders, point caps can be a huge drawback to getting a credit card, as it cuts down on the value of paying with plastic. For people who don’t spend as much money, though, it might never be an issue. Either way, be aware of this limitation and make sure you factor it into your comparison

Frequent flyer debit cards

As there are only three frequent flyer debit cards currently on the market, let’s look at them separately:

The Bankwest Qantas Transaction Account offers 5 Qantas points for every transaction made using the Mastercard. It also gives you 12 points per month for every $100 you have in your account, and 5 points for every ATM withdrawal made overseas.

The Velocity Global Wallet® Prepaid Visa lets you earn 1 point per $1 spent overseas and 1 point per $2 spent in Australia.

Making purchases with a prepaid debit card

The Qantas Cash and Velocity Global Wallet® are both prepaid debit card options, which means you need to transfer money to these accounts before you can make any purchases. While transferring money between accounts is easy, it can take between one and three business days to show up on the prepaid debit card account, so that needs to be factored into your purchasing decisions.

Neither of these cards charge a loading fee, but the Qantas Cash card has a minimum loading of 50 and a maximum of $20,000 (within a 24 hour period). The Velocity Global Wallet® has a minimum loading amount of AUD$1 and a maximum of AUD$25,000 per load. As long as you have enough money loaded on one of these debit cards, you can use them for both everyday purchases or travel and earn frequent flyer points.

2. Card fees

There is a huge difference in the potential fees you pay for using a frequent flyer credit card or debit card, so it’s important to consider these details before choosing how you earn points.

Credit cards

Annual feesAnnual fees are the biggest cost associated with frequent flyer credit cards, and standard fees range from $89 to $450 – or more if you get a super-premium rewards card and use it for frequent flyer points.There are also some frequent flyer credit cards that never charge an annual fee, including the American Express Velocity Escape and American Express Qantas Discovery. Other frequent flyer credit cards may offer no annual fee or a halved annual fee for just the first year, before charging a standard annual fee.

Interest ratesFrequent flyer credit cards typically have high standard interest rates, currently between 19.49% p.a. and 20.99% p.a. (variable). This is the amount of interest applied to any purchases on the card if you don’t pay off the balance in full during each statement period.So, for example, if you had a frequent flyer credit card with an interest rate of 19.99% p.a. and a balance of $1,000, you would pay around $16.66 in interest for the first month. If you only made minimum payments on the card, you could end up being charged $407 in interest and spend 50 months paying it off.Having said that, if you know you can use a credit card without carrying a balance from month to month, this charge won’t be applied.

Foreign transaction feesMost credit cards apply an extra 2% to 3.5% charge to any foreign transactions you make with the card. This fee is designed to cover the cost of processing payments that need to be converted to another currency, but the additional fee can quickly add up if you are travelling overseas or shopping online with an international retailer. Some cards don’t charge these fees, so keep an eye out for these if you’re planning to use your card overseas.

Other credit card feesA number of other fees can be applied depending on the credit card and the way it is used. Most cash advances (i.e. where you withdraw money using your credit card), for example, attract another 3% fee, and some cards also charge ATM transaction fees.There are also dishonour fees that could cost you around $30 if you make a late payment or go over your limit. Looking through the fees and repayments details will help you figure out what charges could apply and whether they are worth it.

Debit cards

Annual feesThe Bankwest Qantas Transaction Account charges $6 a month ($72 a year), but it can be avoided if you deposit $2,000 or more into the account on a monthly basis.There are no annual or monthly account fees for either the Qantas Cash or Velocity Global Wallet® prepaid cards.

Foreign transaction feesYou could pay between 2.95% and 3% for foreign transactions made on one of these debit cards. But it’s worth noting that you can completely avoid this fee using the Qantas Cash or Velocity Global Wallet® by preloading the currency that you plan to spend so that you can use that instead of Australian dollars.

Other feesAs well as these standard costs, you might need to pay other fees depending on the card you’re using. For example, Bankwest Qantas Transaction Account users will need to pay a $10 dishonour fee if you go over your limit and a 14.81% p.a. interest rate for an overdrawn account balance. You can see the product disclosure statement to confirm these costs. The Velocity Global Wallet® charges a $10 supplementary card fee (so you can share the account with a partner), and an emergency cash transfer fee of $15. These debit cards may also attract ATM transaction fees, either charged by them or by a third-party. Virgin has listed these fees for the Velocity Global Wallet® on its website, while both Qantas and Bankwest outline additional fees and charges in their terms and condition booklets.

3. Complimentary Extras

While the debit cards we’ve looked at here generally have fewer upfront costs, credit cards have added value in the form of complimentary extras such as international travel insurance, purchase refund guarantees and extended warranties. Some of the more premium frequent flyer credit cards also include a huge range of travel perks, such as:

Airport lounge passes

Complimentary hotel stays

Flight upgrades

Flight vouchers or booking discounts

Priority seating

Personal concierge services

Membership to other travel-related programs such as Priority Pass

These features have the potential to save you hundreds of dollars. In fact, many people seek out credit cards that offer complimentary travel insurance as a way to save money on their travel plans, while membership to programs like Priority Pass can give you an upfront saving of US$99 or more.

Bonus points

Many frequent flyer credit cards also run promotions offering thousands of bonus points to new customers. This feature is not technically a complimentary extra, because it usually requires you to sign up for a particular card and spend a certain amount on it to get the points, but it is definitely something to consider when you are comparing frequent flyer credit cards and debit cards.

What about debit cards?

Frequent flyer debit cards don’t currently offer any of these complimentary extras, but the Bankwest Qantas Transaction Account does give you free membership to the Qantas Frequent Flyer program. This is a saving of AUD$89.50 on the regular membership price.

Choosing a frequent flyer card

There are pros and cons to both credit cards and debit cards – and as this comparison shows, that extends to frequent flyer options. Choosing a frequent flyer card really comes down to how it will be used and what your own priorities are.

For example, if you regularly use a credit card for purchases already, you may find that a frequent flyer credit card is ideal for earning more points without really changing your current spending habits. Whereas if you’re not a frequent credit card user or don’t want to pay the higher costs, a debit card could be a more suitable way to earn points as you spend.

Now that you know more about the similarities and differences between frequent flyer credit cards and debit cards, you can weigh up credit card and debit card frequent flyer options to determine which one offers you the greatest rewards.

Amy is a Senior Writer at finder.com.au with more than 10 years experience covering credit cards, personal finance and various lifestyle topics. When she’s not sharing her knowledge on money matters, Amy spends her time as an actress.

There are a number of prepaid credit cards offered on the market. Read this article and find out exactly what to look for in order to compare and catch the most ideal prepaid credit card that will suit your lifestyle and financial needs.

Some Westpac credit cards have already been out of the market, but were replaced with new Black credit cards which offer higher reward points earn rate and great deals such as interest-free period, credit limits and complimentary insurance covers.

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